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May 5, 2006

CDC confirms more cases of rare eye infection

by Sam Savage

By Julie Steenhuysen

CHICAGO (Reuters) - The U.S. Centers for Disease Control
and Prevention on Friday reported a 19 percent increase in the
confirmed cases of a serious eye infection that has prompted
eye care company Bausch & Lomb to recall one of its products.

The CDC said it has confirmed 102 cases of Fusarium
keratitis, a potentially blinding eye infection. That is up
from 86 confirmed cases as of May 2.

But the CDC added it is "too early" in its review to say
whether a single product or solution is responsible for the
outbreak.

Bausch & Lomb last month stopped shipping its ReNu with
MoistureLoc contact lens solution after a high percentage of
people with the infection were found to be MoistureLoc users.

The infections were first reported in Asia late last year
and the company on Thursday said a "handful" of cases have now
been confirmed in Europe.

Bausch & Lomb, whose shares have fallen 38 percent so far
this year, went on the offensive as it moved to shore up market
share losses.

The company sent a letter to customers defending its
actions. Bausch Chief Executive Ron Zarrella, in a recorded
video message on the company Web site, assured consumers the
company is working diligently with health officials to
determine the source of the infection.

The moves lifted shares more than 4 percent on Friday amid
a widespread rally in the broader market.

SHARE LOSSES

The CDC did not provide an update on how many of the
confirmed cases of the infection used Bausch & Lomb products,
but said the percentage of ReNu with MoistureLoc users has
remained consistent at about 50 to 60 percent of cases
throughout its probe.

Health officials have yet to determine the root cause of
the eye infection, but the strong link to Bausch & Lomb
products has taken a devastating toll on the company's U.S.
market share, according to Bank of America analyst David Maris.

Citing new sales data collected by ACNielsen, Maris said
Bausch & Lomb has lost nearly a third of its overall lens care
market share in the United States in the past month.

Maris, in a note to clients, said the share loss has moved
well beyond the MoistureLoc product, which fell to a share of
3.1 percent in April, down from about 10.5 percent in March. He
said the MultiPlus brand fell 17 percent in the period to a
share of 12.8 percent.

On Tuesday, the CDC reported that of 56 cases of the
infection confirmed among contact lens wearers, 32 used ReNu
with MoistureLoc, 15 used ReNu MultiPlus and 7 used an
unspecified Bausch product. It also said three patients used
Alcon Inc. products and three used products made by Advanced
Medical Optics Inc..

Analysts seized on the revelation that 27 percent of
confirmed cases were users of Bausch's MultiPlus brand,
suggesting that the entire ReNu franchise might be at risk.

Bausch & Lomb derives 20 percent of its sales and some 50
percent of its profit from its lens care franchise, Weinstein
said.

Harris Nesbitt analyst Joanne Wuensch said investors may
have reacted favorably to the company's attempts to stand
behind its brands, but she expects more troubles ahead.

"They are not out of the woods," Wuensch said.

Bausch shares rose $1.70 to close at $42.89 in Friday trade
on the New York Stock Exchange.